With prosecutors seeking a 30-year prison term for former CEO Cho Dae-woong, founder of Cellivery, who was indicted on charges including violating the Financial Investment Services and Capital Markets Act, the rise and fall of Cellivery, once hailed as a rising star in Korea's biotech industry, is drawing attention again.
The company, which entered KOSDAQ as the first corporations under the growth-track special listing and once surpassed 3 trillion won in market capitalization, was ultimately delisted, and its founder now faces a criminal trial.
◇ A market that bet on the future value of technology
Founded in 2006, the biotech venture Cellivery drew market expectations as it pushed to develop treatments for Parkinson's disease, pancreatic cancer, and rare diseases, touting its proprietary platform technology for delivering drugs to target sites such as inside cells or brain tissue (TSDT·Therapeutic molecule Systemic Delivery Technology).
Founder and former CEO Cho Dae-woong holds a Ph.D. in pathology, microbiology, and immunology from Vanderbilt University in the United States and previously served as a professor at Chonnam National University Medical School. In 2001, together with researchers at Vanderbilt University School of Medicine, Cho developed a technology that delivers active enzymes into living cells and animal tissues to activate them, and published the findings in the international journal Nature Biotechnology in 2001.
The research drew academic attention by demonstrating the potential of intracellular protein delivery technology.
On the strength of this technological capability, Cellivery secured recognition for its corporate value and entered the KOSDAQ market in Nov. 2018 through the growth-track special listing program. The growth-track special listing allows a listing when future growth potential is rated highly relative to current results.
In its early days as a listed company, Cellivery was considered a promising name in biotech. In 2018, it drew attention by signing a joint development deal with Japan's Takeda for a central nervous system disorder therapy, and appeared to be accelerating development of key pipelines such as a Parkinson's disease treatment.
In particular, the COVID-19 pandemic became a catalyst for boosting Cellivery's corporate value. As expectations for a COVID-19 treatment grew, the stock price surged, and market capitalization soared from about 500 billion won in early 2020 to 3.1423 trillion won in Jan. 2021. It was cited as a representative success case of the growth-track special listing program.
A wave of large stock option exercises by executives at the time also drew attention. In the first half of 2021, one executive reaped more than 23 billion won in gains from exercising stock options, while other executives realized profits in the billions of won.
However, it failed to produce clear results in clinical development.
A review of development progress disclosed at the time through filings and IR materials shows the Parkinson's disease treatment remained at the stage of completing preclinical studies and seeking to enter clinical trials. The COVID-19 treatment received FDA approval for a phase 1 investigational new drug (IND) application, but subsequent clinical development did not lead to tangible results.
As clinical results, technology out-licensing, and commercialization fell short of investors' expectations, the stock ultimately turned downward, and by Sept. 2021 market capitalization fell below 1 trillion won again.
◇ Acquiring a wet wipes company instead of developing new drugs… trust collapses
The decisive turning point came in 2021.
At the time, Cellivery raised about 70 billion won through the issuance of convertible bonds (CB) and a paid-in capital increase. The company said the funds would be used for new drug research and development, including a COVID-19 treatment, but skepticism in the market grew after it became known that Cellivery acquired wet wipes maker Ajin Clean (now Cellivery Living & Health) and provided it with hundreds of billions of won in support.
In fact, while Cellivery held more than 100 billion won in cash and cash equivalents at the end of 2021, cash plunged thereafter as investments in subsidiaries and operating outlays continued. The market questioned why a biotech new drug corporations funneled large sums into a household goods business.
The crisis spilled into finances. In 2023, Cellivery received a disclaimer of opinion from its external auditor due to a scope limitation and substantial doubt about its ability to continue as a going concern, and trading was suspended that March. It later fell into a state of complete capital impairment and was ultimately expelled from KOSDAQ this year.
Prosecutors believe that in the process, Cho and others deceived investors as if the funds would be used for new drug research and development, raised about 70 billion won, and then used the money for other purposes.
They also applied charges that he avoided losses by selling shares after learning in advance about the possibility of being designated as an issue for administrative control and a trading suspension. At the sentencing hearing on the 11th, prosecutors sought 30 years in prison for Cho and 7 years for a board director. They also asked the court to impose a 250 billion won fine and forfeit about 67.6 billion won.
◇ The heyday of special listings ends… an era of verification
The Cellivery case did not end as the simple failure of one venture company. The fall of the first corporations under the growth-track special listing was assessed as a case that revealed the limits of the special listing program and the need for improvements.
In practice, the Korea Exchange (KRX) expanded the number of evaluation items for technology special listings from 26 to 35 starting in the second half of 2021 and strengthened verification not only of technological merit but also business viability.
Checks on post-listing research and development progress and fund usage details were also tightened. As a result, the number of new listings by biotech corporations declined further from 2022 onward. Some say that since 2022, listings have centered on corporations that have proven both technological capability and business viability.
An industry official said, "The essence of the Cellivery case lies less in the technology itself than in expectations that failed to be proven in reality," adding, "Biotech corporations must ultimately prove market trust through research and development results and management transparency."
A securities firm official said, "As the bar for the special listing program has risen, it has become a turning point from quantitative growth to qualitative growth," adding, "It is positive that the program has evolved to evaluate not only technology verification and commercialization potential but also post-listing sustainability."